Sports Toto, Attractive Dividend Yields

Sports Toto has guided for its ticket sales to only return to 80−85% of pre-pandemic levels over the near term given only moderate economic growth amidst high inflation that eats into consumers’ spending power. However, Kenanga feels the upside surprise could come from a spike in ticket sales in the event of a jackpot snowballing.

Kenanga likes the stock for its attractive dividend yield of 9%.

  1. Even though the guided ticket sales are below pre-pandemic levels, however, it does not rule out the possibility of ticket sales spiking to as high as >90% in the event of a jackpot snowballing. Recall, during the early part of this year, marginal punters were enticed by the snowballing jackpot of the Supreme Toto 6/58 which eventually hit a whopping RM96m in end-March. Consequently, the gambling stock reported bumper earnings in 3QFY22 with ticket sales surging 45% QoQ to 97% of pre-pandemic levels. The company has been sharing its views with the authorities on the legalisation of online gaming and the crackdown on illegal betting via police enforcement.
  2. The research house does not believe the discussion on the legalisation of online gaming will move beyond the sharing of views given the moral stance of the nation as a whole although historically, intensified crackdowns on illegal betting via police enforcement had resulted in a 5−15% expansion in the legal market.
  3. Meanwhile, its UK-based luxury car distributor HR Owen (HRO) is expected to continue seeing strong topline growth amidst robust demand. However, its bottom line will be affected by higher operating expenses incurred in the opening of a new site in Hatfield by March 2023. During the pandemic period of FY21−22, HRO reported above-normal operating margin of 3.6%−3.3% (due to pent-up demand after the reopening, coupled with the UK government’s pandemic relief fund and grants) as opposed to the pre-pandemic period of c.2%. Forecasts have taken into account its operating margin normalising to 2% in FY23−24F.
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